We get that setbacks happen in life and in business. But they don’t have to be the end of the world. Even if you need to undergo some organizational restructuring in the future, or any other seemingly negative event, there are ways to get back on track and keep your company there. One way to do this is to continuously measure the financial health of your business, so you can correct it before small problems turn into big ones. Dealing with small problems as they arise is the key to preventing the very same from turning into catastrophes down the line. 

 

This week’s blog is inspired by our recent podcast chat with Jerry Lecy, the powerhouse behind Greatest Harvest Bread Co. Jerry opens up about the hurdles he’s gearing up for as he expands to a second location and the significant impact on his company’s financial health. With honesty, he shares the need to reorganize the business to strengthen leadership, all while navigating the financial terrain. Continue reading as we dive into practical solutions that will help Jerry’s business challenges.

 

Thankfully, measuring the financial health of your business is a skill that just about anyone can learn. You must know your numbers to make good business decisions, but the ability to do so is a skill that just about anyone can learn with a bit of coaching. Here are three ways that you can start today: 

 

1. Know your break-even on a daily, weekly, and monthly basis.

Your break-even refers to the amount of revenue that you need to earn to account for the cost of doing business. This includes the cost of renting your storefront, running your online presence, paying employees, the costs associated with the production of your product, etc. This is the point at which the financial health of your business goes from being in the red to in the black. Anything above this point is considered profit. Your break-even point represents the minimum that you need to sell on a daily, weekly, and monthly basis in order to not lose any money.

 

2. Know your gross and net profit margins and how to calculate them.

Profit margin, expressed as a percentage, signifies the earnings a company makes for every dollar of sales. For instance, if a company earns 3 cents for every dollar of goods and services sold, its profit margin is 3 percent. Gross profit is calculated by subtracting the cost of goods sold from revenue (including labor), while net profit margin further deducts operating expenses. Understanding these margins is crucial because relying solely on revenue figures doesn’t provide a comprehensive view of a business’s financial health. High revenues may seem promising, but without considering the costs of goods sold and operating expenses, the actual financial standing remains unclear. Therefore, assessing gross and net profit margins is essential to accurately gauge a company’s financial well-being.

 

3. Have a process in place to collect monies owed to you.

Profit margins and your break-even point are largely irrelevant if you do not have a process in place to collect the monies that are owed to you in the first place. Small business owners and freelancers, especially those that provide services, can at times spend such an inordinate amount of time chasing payments that their profit margins are even less than they think, after accounting for the lost productivity.

 

Having a process in place that makes revenue collection as automated and straightforward as possible helps to protect your business against losses. It also frees up more time for you and your employees to spend on your actual business operations rather than chasing down missed or delinquent payments. It is one of the single most effective investments that you can make into your future as a financially healthy operation. 

 

Are you looking to start learning the skills that you need to run a long-term, financially healthy business? Lucky for you, these skills can be learned by any motivated business owner! If you need guidance in navigating these challenges, we have experienced business coaches who can help you and your business.  

 

Contact us today to book your free consultation! Learn how you can get unstuck & thrive by strengthening your business by understanding its financial health. https://go.scheduleyou.in/Jnt4Lzqat